Wayne County ordered to restore retirees' 13th check

Oct. 11, 2013

Written by

Detroit Free Press Staff Writer

Wayne County should repay millions of dollars, plus interest, to restore a pension fund and allow it to distribute 13th monthly checks that retirees count on as part of their compensation, a judge ruled Thursday.

In his ruling, Administrative Law Judge Doyle O’Connor ordered the county to restore $32 million, plus interest, to the Inflation Equity Fund, which pays 13th checks annually to retirees, and make any other payments necessary to make up for retirees being shortchanged for several years.

O’Connor sided with the unions in his ruling on behalf of the Michigan Employment Relations Commission, which resolves disputes between unions and government entities.

The county will file an appeal of O’Connor’s recommendations, said June West, spokeswoman for Wayne County Executive Robert Ficano. Officials continue to fight a previous appellate court decision to restore the $32 million.

“I’m a happy man,” said lawyer Keith Flynn of Miller Cohen, who represented the unions. He said the judicial recommendations match the severity of the county’s actions that have hurt employees and retirees for years.

The decision dates back to a long-running dispute that led to a complaint filed in January 2010 by the Michigan American Federation of State, County and Municipal Employees Council 25 and grew to include a litany of unfair labor practice charges ranging from layoffs and pay cuts to forced employee furloughs.

The charge was amended six times over the years and assorted courts and judges have ruled on aspects of it, including forced furloughs and pay cuts. Those rulings are awaiting further appeal decisions.

The final piece, dealing with the 13th checks and the Inflation Equity Fund from which they were paid, was covered in today’s decision.

The equity fund was established in 1984 to replace cost-of-living adjustments pensioners were receiving yearly. When Wayne County faced a budget crunch, officials made a unilateral decision in September 2010 to curtail “if not entirely eliminate” 13th checks to current and future retirees, O’Connor wrote.

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The County Commission adopted new rules governing the equity fund, “which in essence gutted the negotiated deferred compensation plan,” the decision notes.

The pension board was told it could not keep more than $12 million in its fund and could not pay out more than $5 million to pensioners per year.

The new cap resulted in the fund being $32 million over-funded. “Rather than disburse the funds to employees or retirees for which it had been held in reserve, the $32 million was immediately transferred to the county’s coffers,” O’Connor explained in his 37-page document.

The judge ruled that the county had no right to do so. He said the county’s actions were no different than if officials showed up at the homes of former employees to explain they were paid too much years ago, “therefore we have repossessed your car and we took your kids’ bikes out of the garage and we are selling them to get our money back.”

O’Connor ruled the money must be paid back with interest; there can be no further interference in issuing the 13th checks and any other injuries to retirees must be made good. That could include making up the difference for 13th checks that became much smaller under the new rules and caps.

According to O’Connor, the equity fund paid out $10 million a year on average before the artificial cap; after the cap, the 2010 payout dropped to about $1 million shared by thousands of retirees.

“They rely on those checks to cover their basic necessities,” Flynn said. “They have been so substantially diminished you can barely call it a benefit.”

The county must also get rid of caps on how much the fund can hold and pay out annually.

Earlier this year, O’Connor sided with the AFSCME in its case against the City of Detroit. The employees’ union had argued that the Detroit City Council didn’t have the right to unilaterally stop paying 13th bonus pension checks to city retirees.

On Friday, O’Connor released a written opinion with more details, saying the payouts might have totaled $174 million since November 2011, when the payments stopped.

City Council members killed the 13th-check benefit after an independent audit found it cost the city’s two pension funds a combined $1.9 billion.